San Antonio green lights negotiations, terms for Spurs arena

San Antonio Spurs

San Antonio will move forward with a proposed, partly bond-financed downtown arena for the National Basketball Association's Spurs after the city council rejected an attempt to pause negotiations to pursue an independent economic impact study of the project. 

The council voted 7-4 on Thursday to authorize the city manager to complete negotiations and execute a non-binding term sheet with the team, following its 4-7 vote against Mayor Gina Ortiz Jones' proposal calling for more due diligence and community engagement before plowing ahead.  

"I think an independent look at this would allow us the confidence to go sell this to our community and sell it hard," she said.

Other council members said city action was needed to provide voters with an arena financing plan outlined in the term sheet before a November election on Bexar County taxes included in the plan.

The arena, which is expected to cost $1.3 billion, would be part of a 25-acre sports and entertainment district that would include a $750 million expansion of the Henry B. Gonzalez Convention Center, an upgraded Alamodome, and a privately funded convention center hotel.

San Antonio's share of the arena's cost would be 38% or $489 million, whichever is less, according to the term sheet. The city or an entity it controls would issue bonds backed by the team's arena lease payments over 30 years, ground rent from leases of city property to private entities, and incremental increases in property and state hotel occupancy tax revenue generated in downtown tax increment reinvestment and project financing zones. 

The revenue bonds for the arena, which would open in 2032, would not be sold until the fall of 2028, according to Ben Gorzell, San Antonio's chief of financial and administrative services.

"We've got to be able to hit some metrics from a financial perspective before we would recommend issuing bonds for the project," he told the council. 

In addition, the city could potentially sell general obligation bonds, if approved by voters, to fund $220 million to $250 million in infrastructure improvements within the district.

Bexar County would contribute up to $311 million, subject to voter approval on Nov. 4 of a proposition to raise the county's hotel occupancy rate to 2% from 1.75% and continue its 5% motor vehicle rental tax.

A minimum of $500 million would come from the Spurs, with the team responsible for paying all arena cost overruns. The team would operate and maintain the arena, which would be owned by a city-controlled entity, and would retain revenue from operations and naming rights. It would also contribute $2.5 million a year up to a total of $75 million to the city under a community benefits agreement. 

The Spurs currently play in the county-owned Frost Bank Center in San Antonio, which opened in 2002 and underwent a more than $110 million renovation in 2015.